Historic inviolable issues – such as climate change and race – is now on the table for the Federal Reserve, as it moves further into uncharted territory.
Why it matters: The face has implications for the way one of the world’s most influential economic bodies manages the policies and regulation of the country’s banks.
Historic inviolable issues – such as climate change and race – is now on the table for the Federal Reserve, as it moves further into uncharted territory.
Why it matters: The face has implications for the way one of the world’s most influential economic bodies manages the policies and regulation of the country’s banks.
What is happening: The Fed recently convened two committees to look at the impact of climate change on the economy and banks – a sign that previous movements on this front have gained some traction.
Between the lines: It may feel small, especially for issues that have threatened and plagued the country for years.
- But it’s a big deal for an institution that has rarely – if ever – spoken publicly about these issues, let alone the economy.
About climate: The Fed is behind its peers around the world where climate change is less politicized.
- Last year, the Fed became the last to officially join a central banking climate network that has existed since 2017.
- Another example: The Bank of England will record climate in stress tests on banks – something that, according to Fed Chairman Jerome Powell, is at an early stage of consideration.
On race: Fed officials have implied that the national unemployment rate is not the only measure of unemployment they look at when measuring the health of the economy.
- Black unemployment – which tends to fall much more slowly – may also be a factor.
I will … push back against the idea that we are doing well if we do it all [unemployment rate] is at some point, but some of these targeted populations are still in great need.
– Raphael Bostic, the only black leader of a Fed bank and a voting member on Fed policy, earlier this month
Flash back: In 2019, Powell begins to highlight the importance of getting the economy buzzing so that minority and low-income workers can reap the benefits.
- Powell said the Fed’s policy on the pandemic “absolutely” would not exacerbate income inequality in America.
- Yes, but: A New York Fed study this year found that easy money policies benefit the rich more than people with lower incomes, exacerbating inequality.
Remarkable: As the Fed becomes increasingly important about the importance of diversity, it is grappling with the lack of diversity in its own ranks.
The big question: Whether the sea change on climate and race is a blip or long lasting change.
- “As long as the Fed is run by trusted people, I think a lot of these changes are here to stay,” Brooklyn Institution Adele Morris told Axios.
What to look for: Resistance of Republicans.
- The latest: Senator Pat Toomey, the leading Republican on the Senate’s powerful Banking Committee, warned this week of ‘mission creep’ at the Fed’s regional banks, voicing their research on topics such as climate change and racial justice.